Falling for Rising Temperatures? finance in a carbon-constrained world

Trinks, A., 2020, [Groningen]: University of Groningen, SOM research school. 182 p.

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  • Title and contents

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  • Summary

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Mitigating climate change requires significant societal change. But global action to keep temperature rise within safe bounds is still highly deficient. A heated debate exists about the role that firms and financial markets play in contributing to a solution. However, why and to what extent would firms and investors care about rising temperatures? Based on a financial-economic framework of risk management, this thesis empirically investigates the relevance of climate-related factors for investment behavior and financial performance.

Attention is given to the perspectives of investors, firms, and public policy and institutions. I zoom in on a key investor practice that accounts for climate change, namely fossil fuel divestment, and study its implications for risk and return in investment portfolios. Next, I investigate how firms’ carbon footprint impacts financial risk in individual assets and stock portfolios. I then take an in-depth look into firms’ carbon emissions from a productive efficiency perspective and study associations with financial performance. Finally, I explore to what extent expectations and uncertainty about future carbon constraints induce firms to use internal carbon prices. Overall, this thesis highlights that risk management provides firms and investors with an important reason to care about rising temperatures.
Original languageEnglish
QualificationDoctor of Philosophy
Awarding Institution
Award date11-May-2020
Place of Publication[Groningen]
Print ISBNs978-94-034-2444-6
Electronic ISBNs978-94-034-2443-9
Publication statusPublished - 2020

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